deutsche euroshop interim report h1 2009

* incl. minorities

in a new loan agreement alongside a loan for 150.0 million due to be extended in October 2009. This refinancing will reduce our annual interest expense by around 11 million and increase the average residual maturity of our loans to roughly eight years. By the end of 2012, we will have no long-term borrowings to renegotiate.

Shortly after completing this refinancing, we also further improved the Company’s equity base by increasing the share capital to 137,812,496.00. The 3,437,498 new shares were subscribed by insti-tutional investors via an accelerated bookbuilding process. The gross proceeds for the Company from the capital increase totalled approximately 167 million, which we will use to fund further growth and to seize investment opportunities that may arise.

In the interim report on the first quarter, we expressed optimism that we would also be able to pay a dividend of 11.05 per share for the current financial year. Now that the first six months have passed, we are in a position to reaffirm this confident view.

Hamburg, August 2009

Claus-Matthias Böge Olaf G. Borkers

Dear ShareholDerS,

Dear reaDerS,

The first six months of 2009 went according to plan for Deutsche EuroShop. With revenue at 163.0 million, we exceeded earnings in the first half of 2008 by 14%. Net operating income (NOI) also improved by 14% to 155.5 million, while EBIT climbed 15% to 153.8 million.

These rises were partly the result of the contributions to operating income made by the newly opened shopping centers in Hameln and Passau, in their first full first half-year. In addition, the increase in our share in City-Point in Kassel from 40% to 90% at the start of 2009 allowed us to fully consolidate this center, with correspond-ing effects on the balance sheet and income statement.

Funds from operations (FFO) improved by 9% from 10.70 to 10.76 per share. Consolidated profit was boosted by positive exceptional and currency effects on measurement gains, which rose 41% from 121.6 million to 130.5 million. Earnings per share correspondingly increased from 10.63 to 10.89.

After the end of the period under review, we refinanced two loans with a total volume of 1132.2 million for ten years at the start of July. A loan for 182.2 million that will not mature until 2013 was included

Letter from the executive Board

KEy SHArE DATA

Sector / industry group Financial Services / real estate

Share capital on 30.06.2009 134,374,998.00

Number of shares on 30.06.2009 (no-par value registered shares) 34,374,998

Dividend 2009 11.05

Share price on 30.12.2008 124.30

Share price on 30.06.2009 121.95

low / high in the period under review 118.66 / 126.00

Market capitalisation on 30.06.2009 1755 million

Prime Standard Frankfurt und Xetra

oTC trading Berlin-Bremen, Düsseldorf, hamburg, hannover, München

und Stuttgart

Indices MDaX, ePra, GPr 250, ePIX 30,haSPaX

ISIN De 000748 020 4

Ticker symbol DeQ, reuters: DeQGn,De

KEy GrOuP DATA

3 million01.01. – 30.06.

200901.01. – 30.06.

2008 + / –

revenue 63.0 55.2 14%

eBIT 53.8 46.9 15%

Net finance costs -27.7 -22.8 -21%

eBT 36.9 26.3 40%

Consolidated profit 30.5 21.6 41%

FFo per share (1 ) 0.76 0.70 9%

ePS (1 ) 0.89 0.63 41%

30.06.2009 31.12.2008

equity * 1,009.9 977.8 3%

liabilities 1,122.0 1,029.1 9%

Total assets 2,131.9 2,006.8 6%

equity ratio (%) * 47.4 48.7

lTV-ratio (%) 48.6 46.1

Gearing (%)* 111 105

Cash and cash equivalents 61.3 41.7 47%

InterIm report for fIrst half of 2009

2 Deutsche euroshop ag InterIm report for fIrst half of 2009

Business and economic conditions

GrouP STruCTure aND oPeraTING aCTIVITIeS

ActivitiesDeutsche EuroShop is the only public company in Germany to invest solely in shopping centers in prime locations. It currently has investments in 16 shopping centers in Germany, Austria, Poland and Hungary. The Group generated the reported revenue from rental income on the space let in its shopping centers.

Group’s legal structureDue to its lean personnel structure and concentration on just one operating segment, the Deutsche EuroShop Group is centrally organ-ised. The Group managing company is Deutsche EuroShop AG. It is responsible for corporate strategy, portfolio and risk manage-ment, financing and communication.

The Company’s registered office is in Hamburg. Since its estab-lishment in 2000, Deutsche EuroShop AG has been an Aktien-gesellschaft (public company) under German law. The individual shopping centers are managed as separate companies. Depending on the share of the nominal capital held, these are either fully con-solidated (over 50% share) or proportionally consolidated (up to 50% share) as investment properties. The investment in Galeria Dominikanska in Wroclaw is recognised under non-current financial assets (33.3% share).

The share capital totals 137,812,496 (following the capital increase on 7 July 2009) and is composed of 37,812,496 no-par value regis-tered shares. The notional value of each share is 11.00.

MaCroeCoNoMIC aND SeCTor-SPeCIFIC CoNDITIoNS

After the German economy experienced a massive downturn in the first quarter of 2009, there are now increasing signs that the econ-omy will stabilise and the recession come to an end in the second half of the year. However, it is difficult to predict when the global economy will return to growth. The reorganisation and reform of the international financial system continue to be the focal point of the shake-out. The efforts of the monetary, fiscal and supervisory policymakers have been geared in this direction for almost two years now. Public funds have been used on a vast scale for economic packages and bailouts in the financial sector. The resulting levels of national debt in the western industrialised countries are worrying, and massive systemic risks continue to exist within the economic and financial markets.

Domestic consumption has decoupled somewhat from these events. The GfK research group regularly reports that consumer spending and confidence are increasing all the time, driven by hopes of immi-nent economy recovery. At the same time, researchers have warned of over-optimism. Should unemployment rise significantly in late autumn, it is argued that this will hurt consumer sentiment.

To date, we have been unable to discern any trends in our segment that might lead to falling rental income. The revenue of retailers in our shopping centers is very stable. Consumption continues to be sup-ported by low energy prices and practically non-existent inflation.

resuLts of operations, financiaL position and net assets

Increase in the shareholding in City-Point KasselWith effect from 2 January 2009, we increased our shareholding in City-Point Kassel GmbH & Co. KG from 40% to 90%. The purchase price of the shares was 116.4 million and was paid in cash.

The following assets and liabilities were thereby acquired at fair value:

T1

Current assets 1,263

Non-current assets 69,840

Current liabilities 176

Non-current liabilities 46,488

until 31 December 2008, the property company had been propor-tionally included in the consolidated financial statements. From 2009, its financial statements will be consolidated in full, which will have a corresponding impact on all the items in the consolidated financial statements. The higher revenue and cost items and the changes in assets and liabilities are essentially the result of the change in the scope of consolidation. The first-time consolidation resulted in a positive difference in accordance with IFrS 3 in the amount of 18.1 million, which flowed into the measurement gains and increased net income.


reSulTS oF oPeraTIoNS

14% revenue increaserevenue in the first half of 2009 totalled 163.0 million, represen-ting a 14% rise year-on-year (155.2 million). The full consolidation of the results of the Kassel center resulted in higher revenue con-tributions than in the past. In addition, the two centers opened in Hameln and Passau in 2008 also contributed to revenue growth. revenue from existing properties climbed 1.4% year-on-year.

Higher operating and administrative costs for property as a result of new centersHigher expenses were incurred for the operation of the shopping centers in the period under review due to the opening of the centers in Hameln and Passau. The operating and administrative costs for property were 17.5 million in the reporting period, compared with 16.7 million in the same period the previous year.

Other operating expenses up 50.2 millionOther operating expenses climbed 10.2 million to 12.4 million (previous year: 12.2 million).

EBIT increases by 15%EBIT increased by 16.9 million (+15%) from 146.9 million to 153.8 million. This was chiefly due to contributions to earnings from the recently opened properties in Passau and Hameln and the full inclu-sion for the first time of the property company in Kassel.

Net finance costs in line with expectationsNet finance costs totalled 127.7 million, 14.9 million more than the 122.8 million recorded the previous year. This was attribut-able firstly to the higher interest expense incurred following the consolidation of Kassel, and secondly to the interest expense for the Hameln and Passau centers. Interest income declined due to the sharp fall in capital market rates. Income from participat-ing interests came in the form of a dividend distribution by our Polish property company (Galeria Dominikanska), which since the second quarter of 2008 has paid them quarterly. Income attribut-able to minority shareholders was also higher than in the first six months of 2008.

Measurement gains experience exceptional and currency effectsMeasurement gains rose from 12.2 million to 110.8 million, thanks to a special effect related to the first-time full consolidation of our property company City-Point Kassel GmbH & Co. KG in the amount of 18.1 million, against a provision for expenses of 11.8 million. Furthermore, the depreciation by the Polish zloty and Hungarian forint resulted in unrealised currency gains of 17.3 million. Meas-urement gains were reduced by the 12.1 million share of income attributable to minority shareholders.

EBT up 40%EBT rose from 126.3 million to 136.9 million. This corresponds to a year-on-year increase of 110.6 million or 40% and is mainly attribut-able to the effects already described under measurement gains.

FFO per share: 50.76FFO (funds from operations) increased by 10.06 from 10.70 to 10.76 per share (number of shares as at 30 June 2009). This repre sents an increase of 9% and was primarily achieved through the newly opened properties and the “Kassel effect”.

Consolidated profit: 530.5 million; earnings per share: 50.89Consolidated profit totalled 130.5 million, up by 18.9 million ver-sus the first six months of 2008 (121.6 million). This is equiva-lent to profit growth of 41%. Earnings per share consequently rose from 10.63 to 10.89 (number of shares as at 30 June 2009). Of this, 10.63 resulted from operating profit and 10.26 from the measurement gains.

FINaNCIal PoSITIoN aND NeT aSSeTS

Net assets and liquidity During the reporting period, the Deutsche EuroShop Group’s total assets increased by 1125.1 million to 12,132.0 million. Non-current assets rose by 173.8 million, due in particular to the first-time consolidation of City-Point Kassel. receivables and other assets increased by 131.8 million, mainly attributable to the fact that the dividend of 136.1 million was paid at the end of June into the dividend redemption account and is recognised under accruals and deferrals as at the reporting date. At 161.3 million, cash and cash equivalents were 119.6 million higher than on 31 December 2008.

Equity ratio of 47.4%The equity ratio including minority interests decreased from 48.7% (31 December 2008) to 47.4% as of 30 June 2009.

Liabilities As at 30 June 2009, bank loans and overdrafts stood at 1986.0 mil-lion, 186.2 million higher than at end-2008. This increase was due partly to the first-time full consolidation of City-Point Kassel and partly to the recourse to short-term loans. Non-current deferred tax liabilities rose by 16.5 million to 188.7 million. Other liabilities and provisions increased by 10.4 million.


the shopping center share

During the first six months of 2009, the Deutsche EuroShop stock performed well at first, rising on 6 January from 124.30 (2008 year-end closing price) to 126.00, its high for the period under review. In a generally weak market environment, particularly for real estate companies, the share price then fell to 118.66 (6 March 2009) before rallying somewhat thereafter. The price on 30 June 2009 was 121.95, which means that over the first six months of 2009 it fell 9.7%. The MDAX rose by 2.7% over this period. On 30 June 2009, Deutsche EuroShop had market capitalisation of 1755 million.

Deutsche EuroShop vs. MDAX and EPRAComparison, January to July 2009

Roadshows and conferences Between April and June, we presented Deutsche EuroShop at conferences organised by Deutsche Bank in Frankfurt and Kem-pen & Co. in Amsterdam. We also held numerous meetings with institutional investors and analysts at roadshows in Frankfurt, Lon-don, Zurich, Geneva, Paris, Copenhagen and Dublin.

Awards for investor relations workThe investor relations activities of Deutsche EuroShop were hon-oured through two further awards with industry-wide recognition. The “German Investor relations Award 2009” in the MDAX seg-ment, bestowed on us in April by WirtschaftsWoche, the German Investor relations Association (DIrK) and Thomson reuters, was followed in June by 1st place in the “Capital Investor relations Award 2009”, MDAX category, from Capital magazine and the Society of Investment Professionals in Germany (DVFA).

Annual General MeetingThe Annual General Meeting of Deutsche EuroShop AG was held on 30 June 2009. The venue, as in the previous year, was the Alte Dressurhalle at Hagenbeck Zoo. Just under 300 shareholders attended, representing 56.5% of the share capital at the time of the voting. Items on the agenda included elections to the Super-visory Board. All agenda items were approved by a large majority. A dividend of 11.05 per share was paid out on 1 July 2009.

Broad coverageCurrently, 25 analysts from renowned German and international investment companies provide regular coverage of the Deutsche EuroShop stock and publish reports containing their assessment of its prospects. Other banks have also indicated that they would like to initiate coverage of Deutsche EuroShop in the near future.

report on post-BaLance-sheet-date events

After the end of first half of 2009, Deutsche EuroShop increased its share capital from 134,374,998.00 to 137,812,496.00 through partial use of its authorised capital, excluding shareholders’ sub-scription rights. The 3,437,498 new shares were subscribed by insti-tutional investors via an accelerated bookbuilding process. The new shares were admitted for trading without a sales prospectus to the regulated market of the Frankfurt Stock Exchange, with a simultaneous listing in the Prime Standard segment of the Frank-furt Stock Exchange, which has enhanced disclosure obligations. The shares qualify for a dividend from 1 January 2009. The place-ment price was 119.50 per share. The Company’s gross proceeds from the capital increase were approximately 167 million.

risk report

There have been no significant changes since the beginning of the financial year with regard to the risks associated with future busi-ness development. We do not believe the Company faces any risks capable of jeopardising its continued existence. The information provided in the risk report of the consolidated financial statements as at 31 December 2008 is therefore still applicable.

TreND oF Share indexed, base of 100, %

Deutsche euroShop MDaXePra

JaN FeB Mar aPr MaY JuN Jul

120

110

100

90

80

70

70

80

90

100

110

120

70

80

90

100

110

120


report on opportunities and outLook

eCoNoMIC CoNDITIoNS

The German government has slashed its growth forecast for the current year and also sees the economy stagnating in 2010. The financial crisis has now taken a firm hold and reached almost all sectors of the economy. It is extremely difficult to issue reliable predictions concerning future developments, but we believe our conservative business model and the fact that our rental income is secured for the long term mean that we are comparatively well-placed to cope with the situation.

We still see no conspicuously negative trends with regard to turn-over at our shopping centers. Consumers’ behaviour remains very robust. However, in view of the lowered economic forecasts, we expect retail sales to decline in 2009.

eXPeCTeD reSulTS oF oPeraTIoNS aND FINaNCIal PoSITIoN

Kassel and Hamm undergo restructuringOur shopping centers in Kassel and Hamm are being restructured until autumn 2009. At City-Point Kassel, the space previously occupied by Hertie will be divided up and let to several small and medium-sized retailers. The required investment amount, including imputed lost rental income and ancillary costs during the construc-tion period, will total approximately 15.1 million.

At the Allee-Center Hamm, the tenancy agreement with a hyper-market operator was terminated early. After conversion (investment costs of 11.8 million), these areas will be occupied by a food market and a major clothing store.

Center expansions in Dresden and the Main-Taunus-ZentrumWork has already begun on expanding the Altmarkt-Galerie in Dresden. The selling area in the shopping center is set to increase by approximately 18,000 m² (it currently has around 26,000 m²), with some 90 new shops.

We also anticipate that we will be able to begin expanding the Main-Taunus-Zentrum near Frankfurt this year. The selling area in the center is set to increase by approximately 12,000 m², allowing some 60 new shops to open.

Unchanged forecast for 2009The results of the first six months confirm our budgeted figures for the whole of 2009. We expect revenue to increase to 1125-128 million. EBIT will be 1105-108 million this year, on our forecasts, while EBT excluding measurement gains/losses will be 150-52 mil-lion. We expect funds from operations (FFO) of between 11.38 and 11.43 per share, taking into account the capital increase that was conducted.

On this basis, we remain optimistic that we will once again be able to pay a dividend of 11.05 per share for financial year 2009.


ifrs consoLidated BaLance sheetaS oF 30 JuNe 2009

aSSeTS

in 1 thousand 30.06.2009 31.12.2008

Assets

Non-current assets

Intangible assets 28 32

Property, plant and equipment 25,169 21,199

Investment Properties 1,967,915 1,897,767

Non-current financial assets 30,107 30,316

Investments in equity-accounted associates 3,721 3,740

other non-current assets 878 930

Non-current assets 2,027,818 1,953,984

Current assets

Trade receivables 1,768 2,717

other current assets 39,453 6,737

other financial investments 1,600 1,740

Cash and cash equivalents 61,285 41,671

Current assets 104,106 52,865

Total assets 2,131,924 2,006,849

eQuITY aND lIaBIlITIeS

in 1 thousand 30.06.2009 31.12.2008

Equity and liabilities

Equity and reserves

Issued capital 34,375 34,375

Capital reserves 546,213 546,213

retained earnings 307,055 279,862

Total equity 887,643 860,450

Non-current liabilities

Bank loans and overdrafts 919,266 879,078

Deferred tax liabilities 88,732 82,313

right to redeem of limited partners 122,239 117,320

other non-current liabilities 11,891 14,941

Non-current liabilities 1,142,128 1,093,652

Current liabilities

Bank loans and overdrafts 66,724 20,730

Current trade payables 2,519 3,039

liabilities to other investees and investors 0 35

Tax provisions 492 662

other provisions 26,585 18,221

other current liabilities 5,833 10,060

Current liabilities 102,153 52,747

Total equity and liabilities 2,131,924 2,006,849


ifrs consoLidated income statementFor The PerIoD FroM 1 JaNuarY To 30 JuNe 2009

in 1 thousand 01.04. – 30.06.2009 01.04. – 30.06.2008 01.01. – 30.06.2009 01.01. – 30.06.2008

revenue 31,216 28,310 62,990 55,202

Property operating costs -1,705 -1,217 -3,636 -3,206

Property management costs -1,831 -1,850 -3,815 -3,455

Net operating income (NOI) 27,680 25,243 55,539 48,541

other operating income 435 294 695 531

other operating expenses (corporate costs) -1,330 -1,345 -2,385 -2,187

Earnings before interest and taxes (EBIT) 26,785 24,192 53,849 46,885

Income from investments 557 1,012 884 1,012

Interest income 219 664 379 1,191

Interest expense -12,266 -11,568 -24,981 -22,339

Profit/loss attributable to limited partners -2,017 -1,348 -4,014 -2,695

Net finance costs -13,507 -11,240 -27,732 -22,831

Measurement gains -5,957 1,023 10,821 2,244

Profit before tax (EBT) 7,321 13,975 36,938 26,298

Income tax expense -1,230 -2,577 -6,480 -4,706

Consolidated profit 6,091 11,398 30,458 21,592

Basic earnings per share (3 ) 0.18 0.33 0.89 0.63

Diluted earnings per share (3 ) 0.18 0.33 0.89 0.63

consoLidated statement of comprehensive income

in 1 thousand 01.04. – 30.06.2009 01.04. – 30.06.2008 01.01. – 30.06.2009 01.01. – 30.06.2008

Consolidated profit 6,091 11,398 30,458 21,592

Change due to currency translation effects 6,639 -1,176 -6,146 -2,357

Change in cash flow hedge 4,496 4,703 2,881 1,903

Total of earnings recognised directly in equity 11,135 3,527 -3,265 -454

Total profit 17,226 14,925 27,193 21,138

Profit attributable to group shareholdes 17,226 14,925 27,193 21,138


statement of changes in eQuitY aS oF 30 JuNe 2009

in 1 thousand Share capital Capital reservesOther

retained earnings Legal reserve Total

01.01.2008 34,375 546,213 278,210 2,000 860,798

Change in cash flow hedge 1,903 1,903

other changes -2,357 -2,357

Total of earnings recognised directly in equity 34,375 546,213 -454 2,000 -454

Consolidated profit 21,592 21,592

Total profit 34,375 546,213 299,348 2,000 881,936

Dividend payments -36,094 -36,094

30.06.2008 34,375 546,213 263,254 2,000 845,842

01.01.2009 34,375 546,213 277,862 2,000 860,450

Change in cash flow hedge 2,881 2,881

other changes -6,146 -6,146

Total of earnings recognised directly in equity 34,375 546,213 -3,265 2,000 -3,265

Consolidated profit 30,458 30,458

Total profit 305,055 887,643

30.06.2009 34,375 546,213 305,055 2,000 887,643

ifrs consoLidated cash fLoW statementFor The PerIoD FroM 1 JaNuarY To 30 JuNe 2009

in 1 thousand 01.01.-30.06.2009 01.01.-30.06.2008

Profit after tax 30,458 21,592

Income from the application of IFrS 3 -8,075 0

Profit / loss attributable to limited partners 6,096 3,955

Depreciation of property, plant and equipment 12 5

other non-cash income and expenses -4,828 -4,376

Deferred taxes 6,419 4,551

Operating cash flow 30,082 25,727

Changes in receivables -31,455 7,173

Changes in other financial investments 140 -2,947

Changes in current provisions 8,175 -12,795

Changes in liabilities -7,989 2,971

Cash flow from operating activities -1,047 20,129

Payments to acquire property, plant and equipment -22,170

Inflows and outflows for investments in non-current financial assets 18 -32,499

Cash flow from investing activities -22,152 -3,899

Changes in interest-bearing financial liabilities 44,584 16,629

Payments to Group shareholders 0 -36,094

Payments to minority shareholders -4,173 -3,789

Cash flow from financing activities 40,411 -23,254

Net change in cash and cash equivalents 17,212 -39,523

Cash and cash equivalents at beginning of period 41,671 108,993

Currency related changes -596 -8,903

other changes 2,998 -4

Cash and cash equivalents at end of period 61,285 60,563


discLosures

Basis of presentationThese financial statements of the Deutsche EuroShop Group as at 30 June 2009 have been prepared in accordance with Interna-tional Financial reporting Standards (IFrS).

The management report and the abridged financial statements were not audited in accordance with section 317 of the Handels-gesetzbuch (HGB – German Commercial Code), nor were they reviewed by a person qualified to carry out audits. In the opinion of the Executive Board, the report contains all the necessary adjust-ments required to give a true and fair view of the assets, liabili-ties, financial position and profit or loss for the first six months. The performance of the first six months up to 30 June 2009 is not necessarily an indication of future performance.

The accounting policies applied correspond to those used in the last consolidated financial statements as at the end of the financial year. A detailed description of the methods applied was published in the notes to the consolidated financial statements for 2008.

oTher INForMaTIoN

DividendNo dividend was distributed during the first half of 2009.

Share optionsThe variable components of the remuneration of the members of the Executive Board and Supervisory Board do not include any share options or similar securities-based incentive schemes.

Responsibility statement by the Executive BoardTo the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim con-solidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportu-nities and risks associated with the expected development of the Group for the remaining months of the financial year.

Hamburg, August 2009

Claus-Matthias Böge Olaf G, Borkers

financiaL caLendar

13.08. Interim report h1 200925.08. Credit Suisse real Estate round Table, London26.08. roadshow London, WestLB27.08. roadshow Edinburgh, CA Cheuvreux01.09. roadshow Cologne, Dusseldorf, WestLB02.09. roadshow Brussels, Petercam03.-04.09. EPrA Annual Conference, Brussels16.09. Sal. Oppenheim real Estate Forum, Amsterdam17.09. Supervisory Board meeting, Hamburg23.09. uniCredit German Investment Conference, Munich30.09.-01.10. Bank of America Merrill Lynch Global real Estate

Conference, New york01.10. Société Générale Pan European real Estate

Conference, London05.-07.10. Expo real, Munich20.10. real Estate Share Initiative, Frankfurt07.11. Hamburg Exchange Convention12.11. Interim report Q1-3 200916.11. roadshow Paris, Berenberg16.11. roadshow London, M.M. Warburg17.11. roadshow Zurich, Berenberg17.11. roadshow Amsterdam, rabobank19.11. WestLB Deutschland Conference, Frankfurt26.11. Supervisory Board meeting, Hamburg01.12. Commerzbank real Estate Conference, Frankfurt01.-03.12. uBS Global real Estate Conference, London

Our financial calendar is updated continuously. Please check our website for the latest events: http://www.deutsche-euroshop.com/ir

INVeSTor relaTIoNS CoNTaCT

Patrick Kiss and Nicolas LissnerTel.: +49 (0)40 - 41 35 79 20 / -22Fax: +49 (0)40 - 41 35 79 29E-Mail: [email protected]: www.deutsche-euroshop.com/ir

deutsche euroshop interim report h1 2009

Real Estate